Supply side hysteresis: The case of the Canadian unemployment insurance system

Thomas Lemieux, W. Bentley MacLeod

Research output: Contribution to journalArticlepeer-review

22 Scopus citations


This paper presents results from a 1971 natural experiment carried out by the Canadian government on the unemployment insurance system. At that time, the generosity of the UI system was increased dramatically. We find some evidence that the propensity to collect UI increases with a first-time exposure to the new UI system. Hence, as more individuals experience unemployment, their lifetime use of the system increases. This supply side hysteresis effect may explain why unemployment has steadily increased over the 1972-1992 period, even though the generosity of unemployment insurance did not.

Original languageEnglish (US)
Pages (from-to)139-170
Number of pages32
JournalJournal of Public Economics
Issue number1-2
StatePublished - Oct 2000
Externally publishedYes

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics


  • H53
  • Hysteresis
  • Incentives
  • J64
  • J65
  • Learning
  • Unemployment
  • Unemployment insurance


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